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In May 2023, a FINRA arbitration panel ordered an associated person to pay $43,644.69 in compensatory damages plus interest to an investor who purchased GWG L Bonds. The panel also allowed the associated person, upon full payment, to obtain an assignment of the investor’s rights in the GWG bankruptcy. While punitive damages and attorneys’ fees were denied, the case is another example of investors recovering losses in GWG L Bonds through FINRA arbitration.
Overview of GWG Holdings and Its L Bonds
GWG Holdings raised more than $1.6 billion through the sale of “L Bonds” to retail investors nationwide. Marketed as secured, income-producing investments backed by life insurance policies, these bonds typically carried interest rates between 5.5% and 8.5%, with terms of two to seven years. Unless investors opted out before maturity, the bonds automatically renewed into new terms.
In reality, the GWG L Bonds were illiquid, unrated, and carried significant risk. There was no secondary market for investors to access their funds, and GWG could redeem the bonds at its discretion without penalty. Many investors — particularly retirees — found themselves locked into renewed bonds they hadn’t expected.
As GWG Holdings funneled more of its capital toward Beneficient Company Group, L.P., an affiliated entity, regulators began questioning its financial reporting and securities practices. The SEC initiated action in October 2020 by issuing subpoenas tied to these concerns. The investigation ultimately expanded to include broker-dealers that had sold GWG’s L Bonds to investors.
In 2021, GWG’s outside auditor resigned after raising concerns about the company’s accounting practices. By January 2022, GWG missed a $3.25 million interest payment owed to investors. Only a few months later, in April 2022, the company filed for Chapter 11 bankruptcy protection. Today, the GWG Wind Down Trust projects that investors may recover as little as 2–3% of their original investment, leaving most bondholders with devastating losses.
What Did the Arbitration Panel Find?
The investor alleged that an associated person recommended and sold GWG L Bonds that exposed him to significant losses. The claims asserted included violations of federal securities laws, violations of Pennsylvania securities laws, violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law, breach of contract, common law fraud, breach of fiduciary duty, negligence and gross negligence.
The Award to the Investor
The arbitration panel awarded the investor:
- $43,644.69 in compensatory damages
- 6% annual interest from the date of the award until paid in full
The panel denied punitive damages and attorneys’ fees. It also allowed the associated person, upon full payment, to obtain an assignment of the investor’s rights in the GWG bankruptcy. The panel dismissed the claim against one of the Respondents, without prejudice, noting it had not received evidence that it was served with notice of the claim.
Why This Award Matters – Investor Update 2025
This case shows that even in smaller claims, arbitration panels may hold individual advisors liable for unsuitable GWG sales. This award is one of several FINRA arbitration decisions involving GWG L Bonds.
Even though GWG filed for bankruptcy, given the trustee’s projection that bondholders may recover only 2–3% of principal invested, investors can still pursue claims against the brokerage firms that sold the bonds. Panels have awarded compensatory damages, interest, and costs in multiple cases, underscoring arbitration as a viable path to recovery. Read more about GWG L Bonds in our GWG L Bonds Claims page. For another example of a smaller claim recovery, see our post on the $6K GWG Award.
GWG L Bonds are also one example of the risks associated with Alternative Investments, which are often complex and unsuitable for retail investors. For a broader overview of results in GWG cases, see our GWG Arbitration Awards page.
This award highlights how arbitration continues to deliver meaningful recoveries for GWG L Bond investors. By comparison, the Wind Down Trust estimates that if the District Court approves the settlement with GWG’s former directors and officers, cumulative distributions to bondholders will be only 2.694% to 3.446% of invested principal. That means only $2,694 to $3,446 on a $100,000 investment – a fraction of the losses investors suffered.
Key Takeaway for Investors
Awards like this show that brokerage firms can be held liable for their unsuitable sales of GWG L Bonds. Investors across the country have brought similar claims, arguing that the bonds were unsuitable and that brokerage firms and brokers failed to supervise their sale. Arbitration panels continue to hear claims and issue awards for investors who suffered losses.
The claims reflected two recurring themes common in GWG cases: suitability and supervision.
- Suitability (FINRA Rule 2111): Brokers must have a reasonable basis to believe an investment fits a client’s financial situation, objectives, and risk tolerance. Illiquid, high-risk securities like GWG L Bonds often failed this test. Learn more about Unsuitable Investments.
- Supervision: Failure to supervise occurs when a brokerage firm does not fulfill its duty to monitor its financial advisors and their activities in customer accounts. Firms must maintain systems to supervise their brokers’ recommendations and sales. Arbitration panels have consistently held firms liable for supervisory failures in cases involving complex and illiquid products. See our page on Failure to Supervise.
- Securities Violations: The investor asserted state and federal securities claims, including violations of federal securities laws, violations of Pennsylvania securities laws, violation of Pennsylvania’s Unfair Trade Practices and Consumer Protection Law. Learn more about how state securities statutes can enhance investor recovery on our Securities Violations page.
Contact Altamirano PLLC About GWG L Bond Claims Today
If you invested in GWG L Bonds and have losses, call Altamirano PLLC today. Our Principal, Jorge Altamirano, has handled more than 1,500 FINRA arbitration claims and continues to represent GWG investors nationwide in recovering their losses. Many investors were told these bonds were “safe” or “low-risk,” but in reality they were high-risk, complex, illiquid, and unsuitable for investors, including retirees and conservative investors.
Call us at (212) 220-6556 to discuss your options. We handle cases on a contingency fee basis, which means you do not owe us a legal fee unless we recover for you.
Contact Jorge Altamirano, Principal of Altamirano PLLC
One World Trade Center, 85th Floor
New York, NY 10007
(212) 220-6556
[email protected]
Securities claims are time-sensitive. Harmed investors are encouraged to act quickly and contact Altamirano PLLC to speak with an experienced securities arbitration lawyer.
